What’s New

Transit and transportation fringe benefit: If your employer provides a benefit for transit passes and transportation in a commuter highway vehicle (such as a vanpool), your maximum tax-free benefit is now $130 per month for combined commuter highway vehicle transportation and transit passes; $250 per month for qualified parking or some qualified bicycle commuting reimbursement of expenses.

Foreign earned income exclusion: If you qualify, you can exclude up to $100,800 of your foreign earned income from your taxable income for 2015. If you and your spouse both work in a foreign country and meet the qualifications, you may each be able to exclude up to $100,800.

American opportunity tax credit: The American Opportunity Tax Credit expanded on the Hope Credit. The income limits are higher, the credit is available for more qualified expenses, and you can use the credit for four years of post-secondary education instead of just two. Taxpayers will receive a tax credit based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, paid during the taxable year for tuition, fees and course materials. In addition, you can even get a refund if you don’t owe any tax for up to 40% of the credit ($1,000). Generally, a taxpayer whose modified adjusted gross income is $80,000 or less ($160,000 or less for joint filers) can claim the credit for the qualified expenses of an eligible student. The credit is reduced if a taxpayer’s modified adjusted gross income exceeds those amounts. A taxpayer whose modified adjusted gross income is greater than $90,000 ($180,000 for joint filers) cannot claim the credit. Also refer to http://clotax.com/individuals/third/tax-benefits-for-education/ for more information.

Child and dependent care credit amounts and Child tax credit: The maximum amount of child and dependent care expenses eligible for the credit is now $3,000 if you have one child, or $6,000 if you have two or more children. These increased amounts are permanent. Child tax credit has been made permanent at $1,000 per child. You must reduce the maximum credit amount of $1,000 for each child if your modified adjusted gross income (AGI) is more than certain amount by your filing status. Plus, starting in 2015, if you claim a foreign earned income or housing exclusion, you cannot claim the refundable portion of the child tax credit, also known as the additional child tax credit.

Kiddie tax rules: The amount of unearned income certain children can have before they pay tax at their parents’ rates has gone up. Children can now have up to $2,100 in unearned income before they are subject to “kiddie tax” rules. Depending on the child’s age and whether he or she is a student, kiddie tax rules may apply to children up to age 23.